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He was educated at the University of Toronto, where geologist A.P. Coleman persuaded him away from teaching mathematics and into Earth Sciences. His PhD was attained at Harvard, with postgraduate work in Germany and France. After working as a field geologist for the Canadian International Boundary Commission, he was a professor and head of the Department of Geology at Harvard University from 1912 until 1942.

For the Boundary Commission, working in six field seasons, Daly mapped the border from the Pacific Ocean to the Great Plains, a rugged swath 400 miles long and 5 to 10 miles wide – an area of about 2,500 square miles. He documented the geology alone, but had the help of one field assistant and numerous wranglers and porters. He collected 1,500 rock specimens and made 960 thin sections, using a German polishing technique he learnt as a student. The project also included 1,300 photographs, dozens of lake soundings, stratigraphic and structural mapping, petrology, and morphology.[1] In 1912, he filed his final report with the Geological Survey of Canada, a massive 3-volume tome he called North America Cordillera: Forty-Ninth Parallel.[2] This work along the 49th parallel led him to formulate a theory of the origins of igneous rocks, and later publish his seminal work Igneous Rocks and Their Origin in 1914.

According to Daly's biographer, James Natland, Daly was an early proponent of Arthur Holmes' and Alfred Wegener'scontinental drift theory.[3] Daly summarized his ideas in his 1926 book, Our Mobile Earth, which included on the title page small print adopted from Galileo: E pur si muove. Daly's theory on continental displacement was based partly on the idea that after the Moon was ejected from the Earth, continental movement was an inevitable part of rebalancing the planet; he also suggested that continental material accruing near oceans eventually slips, and forces continents to creep along. He expanded this notion in Strength and Structure of the Earth, in 1940, where Daly anticipated aspects of plate tectonics, including introduction of a "mesospheric shell" and a slippery vitreous basaltic substratum.

Daly also proposed the impact theory of lunar creation in 1946, which countered two prevailing notions: George Darwin's hypothesis that the Moon spun out of the primordial Earth due to centrifugal force; and, another fashionable theory that the Moon was a captured wayward asteroid. Daly applied Newtonian physics to make his point, which was later validated.